Empirica  Journal of European Economics

Sponsored by the Austrian Economic Association and the Austrian Institute of Economic Research

Empirica publishes empirical and theoretical work on all economic aspects of European Integration. The topics may range from
all challenges concerning the deepening of the European Union (Single Market, Lisbon Agenda, EMU) to enlargement and the external
relations of the EU (globalisation).

This paper attempts to explain the seeming unresponsiveness of labour to react to economic disparities in terms of migration.
In theory, the potential of workers to implicitly alleviate regional disparities in, for example, unemployment or wage levels
by relocating appears potent, but finds little support empirically. To resolve this perplexity, a dynamic discrete choice
model is used, which translates into a two stage estimation strategy for recovering structural parameters. Investigating Austrian
bilateral movements on the NUTS 3 level from 2002 to 2014, the results suggest that this unresponsiveness builds on two pillars.
First, estimated average migration costs are in the range of six times the average annual wage, which appears sizable enough
to prevent taking advantage of economic opportunities for workers. These costs are shown to have decreased over time, though.
Second, the relatively high variation in the random utility shifter can be interpreted as relative unimportance of regional
disparities in forming migration decisions. Finally, a spatial approach on estimated regional valuations reveals an apparent
"beauty contest" of regions, where regions' own valuations suffer from proximity to highly attractive ones.

We analyse the correlation of various measures of social capital with the willingness to migrate in 28 post-communist and
five western European comparison countries using the Life in Transition Survey. Memberships in clubs and civil society organisations
are substantially lower in post-communist countries than in the Western European countries. This is mainly due to the cohorts
socialised prior to political reforms in the 1990's. Differences in endowments with this measure of social capital explain
around 2.5 percentage points of the 9 to 11 percentage point difference in the willingness to migrate between the post-communist
and comparison countries. Differences in contacts to friends and family, by contrast, contribute only little to explaining
these differences. Furthermore, despite clear cohort effects in endowments with social capital between cohorts socialised
during and after communist rule, there is no clear evidence of such cohort effects in the impact of social capital on the
willingness to migrate.

This paper explores the commuting paradox in the context of two-partner households by estimating the relationship between
the subjective well-being of spouses and their commuting distances. Some of the former literature has found evidence that
individuals are not fully compensated for changes in commuting (the commuting paradox). We study unitary, cooperative, and
non-cooperative decision-making models to explore which describes the household decision on commuting in the data. We use
panel data from the German Socio-Economic Panel (GSOEP). The regressions show clear evidence for cooperative household decision
making on commuting distances (time) and do not show evidence of the commuting paradox. These results are robust in several
robustness checks, including alternative definitions of household utility.

This study presents a new firm- and project-level dataset containing data on over two million projects co-funded by the EU
structural and cohesion funds in 25 EU member countries during the programming period 2007-2013. Information on individual
beneficiary firms and institutions is linked with business data of Bureau van Dijk's ORBIS database. Moreover, text mining
techniques are applied to categorise the EU cohesion policy projects into fifteen thematic categories. Stylised facts reveal
substantial regional heterogeneity in the distribution of funds to certain projects and beneficiaries (with respect to their
size or industry). Furthermore, regional funds distribution differs across less developed and higher-income as well as urban
and rural regions. In an econometric analysis, we control for project and firm characteristics that we expect to determine
the single project's value, which is confirmed by the results. Nevertheless, there remains unexplained variation in individual
project volumes, which differs systematically across countries.

The international trade literature highlights the importance of firm productivity and economies of scale on the firm's international
export success. In the context of agglomeration economies, firms enjoy productivity gains when they are located close to related
firms and they gain from knowledge spill-overs and other positive externalities. They may also benefit from a potentially
large supply of diverse workers that possess distinct knowledge and problem-solving skills. In such environments, firms may
be more prone to export. In this paper, we employ a comprehensive German data set that combines survey and administrative
data. We ask whether German firms (i.e., establishments) export more as a result of localisation and urbanisation externalities,
and labour market pooling associated with workforce diversity, while controlling for a variety of establishment characteristics.
Using a fractional response model, we provide evidence that manufacturers and smaller establishments benefit more from externalities
and especially from knowledge spill-overs. There is less evidence supporting the benefit of workforce diversity; however,
that factor may be associated with between-establishment variation.

Urban sprawl is rapidly occurring in many Spanish urban areas. The objective of this paper is to evaluate how the trend of
building dispersion of new residential areas may be affecting the fiscal stability of local governments in Spain. The wide
diversity of the characteristics of Spanish urban areas as well as the existence of very similar local fiscal structures make
this case particularly interesting. After delimiting the urban areas and the spatial unit of analysis, a precise index of
urban sprawl, calculated with geo-referenced digital cartography, is used. Using the spatially disaggregated information of
taxes from the Spanish National Institute for Fiscal Studies allows for a measure of fiscal burden by local areas and the
ability to distinguish among types of taxes. Control variables are also available at the local level from the Spanish Census
and other databases. Two methods, quantile regressions and ordinary least squares, are used in order to measure not only the
average change but the heterogeneity across the distribution of the local fiscal burden associated with the changes in urban
sprawl, whilst controlling for other explanatory variables in the model. The results indicate that higher levels of urban
sprawl imply higher local fiscal burden. By tax categories, the phenomenon of urban sprawl particularly affects both local
indirect and direct taxation. These results suggest that local decision-makers should consider urban planning as one of the
fundamental tools to assure long-term local fiscal sustainability.

This paper investigates the empirical relationship between military spending and economic growth in a large panel of advanced
and developing countries over the period 1984–2014, with a particular focus on whether the growth impact of military expenditures
varies with the type and level of security threats. Although there is extensive literature on the military-growth nexus, there
is still no consensus on the nature and magnitude of this relationship. Using an expansive dataset and controlling for country-specific
effects and potential endogeneity, we revisit this issue and reach two firm conclusions: First, military spending has no statistically
significant direct (positive) effect on growth. Second, the nature and level of security threats do not alter the relationship
between military spending and growth. Overall, the empirical results documented in the study suggest that military spending
is simply not important or large enough in most countries to have a meaningful impact on growth.

This paper proposes a more comprehensive multidimensional poverty index for an advanced economy like Germany. Drawing on the
capability approach as conceptual framework, I apply the Alkire-Foster method to the German context. Special attention is
paid to the conceptual integration. Specifically, I argue for including material deprivation and employment as important dimensions,
but against using an additional lack-of-income indicator. The results are consistent with previous findings and also offer
new insights. In particular, I find specific poverty profiles (e.g., for the elderly), but also that gaps in poverty between
subpopulations change over time. Importantly, the results suggest that genuine multidimensional measures add unique insights,
which neither a single indicator, nor a dashboard approach can offer. Finally, the analysis reveals multidimensional and income-poverty
measures to disagree on who is poor. The subsequent analysis of this mismatch lends empirical support to abandon a lack-of-income
dimension.

This paper examines financial integration among stock markets in the Eurozone using the prices from each stock index. Monthly
time series are constructed for four major stock indices for the period between 1998 and 2016. A fractional cointegrated vector
autoregressive model is estimated at an international level. Our results show that there is a perfect and complete Euro financial
integration. Considering the possible existence of structural breaks, this paper also examines the fractional cointegration
within each regime, showing that Euro financial integration is very robust. However, in the financial and sovereign debt crisis
regime, IBEX 35 appears to be the weak link in Euro financial integration, unless Euro financial integration recovers when
this period ends.